Tony Ball, Chief Executive of British Sky Broadcasting Group plc, said:
‘Reaching our 5 million target ahead of schedule is a fantastic achievement. We are confident that we are on course to achieve our target of 7 million subscribers by the end of 2003.
More people switching to digital choose Sky: it is the only place to get the great choice, dynamic interactivity and t-commerce that the digital TV era offers.
In the last year we added more than a million DTH subscribers with growth in the last quarter at record levels. And as people switch to Sky digital, our low churn level shows they are staying with us.’
The total number of subscribers to Sky channels at 30 September 2000 was 9,238,000, an increase of 250,000 in the three months to 30 September 2000 (‘the period’). Of the total subscribers, 8,621,000 were in the UK, and 617,000 in Eire.
The number of DTH subscribers at 30 September 2000 was 4,723,000 of which 4,083,000 (86%) were digital subscribers. The net DTH subscriber growth in the period was 210,000 compared with 122,000 in the three months to 30 September 1999 (‘the comparable period’), an increase of 72%. This represents record first-quarter net growth in DTH subscribers since 1993.
As at 2 November 2000 sales to date were 4,953,000. This means that Sky will achieve its year end target of 5 million subscribers almost two months ahead of schedule.
DTH churn for the period was 9.8% per annum compared to 14.2% per annum in the comparable period. The continuing low rate of churn amongst the larger number of digital subscribers more than offset higher churn within the much smaller, declining, analogue subscriber base.
The number of cable subscribers to Sky channels at 30 September was 3,052,000, a reduction of 273,000 on the comparable period. On 6 September 2000 the company announced a programme supply deal with NTL Inc. designed to increase both the penetration of Sky’s channels and the viewing choices of NTL customers. The deal, which is subject to regulatory approval, will also result in increasing guaranteed revenue streams to Sky.
Sky’s share of viewing in all UK television homes rose 19% in the period to 5.7% from 4.8% for the comparable period.
For the first time ever Sky’s share of viewing within Sky digital homes has now overtaken that of ITV. ITV’s share of viewing in Sky digital homes during the period was 17.3% compared to 20.4% in all multichannel homes and 27.9% in all UK homes. Sky’s own share of viewing within Sky digital homes averaged 19.0% for the period. (Source: SPC/BARB). The decline in ITV’s share of viewing across all UK homes to 27.9% in the period from 30.3% for the comparable period was due in part to its absence from the digital satellite platform.
The company’s earnings before interest, tax, depreciation and amortisation (‘EBITDA’) and before joint ventures and exceptional items for the three months ended 30 September 2000 increased by 31% to £49 million from £37 million in the comparable period.
Revenues increased by 33% to £520 million for the three months to 30 September 2000, from £391 million for the comparable period. There were strong increases in all segments except cable revenues which declined by 3% against the comparable period due to the lower number of cable subscribers. DTH subscription revenues increased to £347 million, a £98 million (39%) increase on the comparable period. This was a result of the 32% increase in the average number of subscribers and a 7% increase in the average revenue per subscriber per annum to £286 (1999/00: £268) due to higher pay per view revenues from digital subscribers. The recently-announced price rise effective from 1 January 2001, the first for eighteen months, is expected to increase the average revenue per subscriber in the second half of the current financial year. Advertising revenue for the quarter was £57 million, an increase of 11% on the comparable period.
Operating expenditure before goodwill for the period rose by £120 million to £484 million. Marketing costs increased by £28 million to £104 million due to higher digital additions in the period. The cost of programming increased by £60 million against the comparable period to £251 million due mostly to the higher number of subscribers.
New Media and Open
New media revenues of £16 million, separately identified for the first time this period, were driven primarily by internet and telephone betting revenues from the business of Sports Internet Group which was acquired in July 2000. This revenue stream is expected to grow further once interactive television betting is launched later this calendar year.
The development of Open continued during the period. Open continued to experience an encouraging level of usage and the number of brand partners increased to over 75. A first class management team is now in place with the appointment of BSkyB’s Jon Florsheim and Roger Blundell as Open’s Managing Director and Finance Director respectively. Regulatory clearance of the company’s acquisition of Matsushita’s and HSBC’s shareholdings in Open is expected in the next few months.
The company has recognised its £13 million share of Open’s operating losses for the period within its share of operating results of joint ventures (1999/00: £20 million). The results of Open will be fully consolidated as a subsidiary on completion of the transaction.
Goodwill of £5 million included in operating profit for the first time is the amortisation of the £265 million provisional goodwill arising on the acquisition of Sports Internet Group.
The company’s loss from the Sky Ventures portfolio of investments reduced to £2.7 million for the period, a reduction of 7% on the comparable period. The market value of the company’s 36% of Music Choice Europe, which listed in October 2000 was £79 million at the close of trading on 2 November.
The company’s share of KirchPayTV losses for the period was £22 million (1999/00: nil).
On 31 August 2000 KirchPayTV disposed of their remaining holding of BSkyB shares via an institutional placing. Under UK GAAP, a non-cash accounting loss arises on the sale of these shares of which the company’s share is £69.5 million. This has been treated as an exceptional item.
The joint venture goodwill of £17 million is principally the amortisation of the provisional £1.4 billion of goodwill arising on the acquisition of the interest in Kirch which is being amortised over 20 years.
As the result of the disposal of its BSkyB shares and of subsequent investments by Kingdom Holdings, Capital Research and Management Company and Lehman Brothers Merchant Banking II L.P., the KirchPayTV business is now well capitalised and able to plan for its long term success in Europe’s largest television market. Following the completion of these transactions, BSkyB’s holding in KirchPayTV will be 22%.
Net debt increased to £1,437 million at 30 September, up from £1,145 million at 30 June 2000. This was due to increases in working capital related to the timing of payments to sports bodies, £43 million spent on transitioning analogue subscribers, £35 million of funding to Open, £20 million capital expenditure and £45 million of net interest paid.
For Further Information Please Contact:
Martin Stewart, Tel: 020 7705 3000
Andrew Griffith, Tel: 020 7705 3000